Monthly Archives: September 2012

Yesterday I had a very nice chat with a friend and colleague, and as part of this chat, a theme that I had thought about before came back to my mind: whenever people interact with one another, this usually implies some sort of contract. And I want to start by giving my own, personal definition of what I understand when I use the term contract…

Naturally, there are written contracts, many of them being pre-printed forms where people simply fill in some blanks and, by signing it, indicate they are willing and accept to be bound by the terms stated therein. But I would argue that most contracts that people enter into are unwritten contracts. In that sense, for me a contract is indeed just that, the willingness and acceptance to display a certain type of behavior in the future, sometimes based on conditional contingencies, sometimes regardless of other future events. And quite a few contracts also contain some sort of provision of what will happen if the contract is not fulfilled. In some contracts this part is left out, which then means that the person misbehaving might be dragged in front of a judge, given that there was a contract to begin with, objectively speaking.

Put differently, whenever I have a (hopefully reasonable) expectation about someone else’s behavior–or more precisely for that behavior to be within certain limits–and this person implicitly or explicitly agrees to my expectation–and of course at the same time has expectations about my behavior in the very same situation–there is some kind of contract at work. And whenever such a contract is violated by straying from the agreed-upon path, there is a conflict that needs resolution.

Now, what are unwritten contracts? For one, as far as I can tell, being in any kind of relationship, including an intimate relationship, can be seen as agreeing to a contract, most of which are never written down but actually only inferred by habitual and customary behavior. To give a practical example: whenever I go shopping for groceries and I put my items on the conveyor belt at the register, I enter into a (sort of business) relationship with the person on the other side of the register, and I have a certain expectation of what is going to happen next. Unless there are circumstances at play that I didn’t notice or I have made some kind of error–for instance, I might have put too many items out for the express check-out line–I would assume that the associate of the store will start scanning or manually processing my grocery items and, once done with this task, ask me to pay for my shopping. In turn, the expectation is then that I will pay and take the items with me when I leave. Obviously, nothing of that is written down or agreed upon on an individual basis, but rather the idea of entering a groceries (or other) store, collecting, and finally presenting the merchandise at the register is seen as my entering into this unwritten contract.

When it comes to personal, intimate, relationships, the contract between the two partners might be much, much more complicated: it contains clauses covering behavior in many, many more domains and regarding many, many more possible situations. But, apart from its complexity, the contract is probably equally unwritten, and entered into–at least in the beginning–implicitly. In fact, even a first date, when two people have little to no knowledge about one another, still comes with a contract: for one, you expect the other person to behave with at least a minimal amount of dignity and respect towards you, and if that part is broken, the date usually ends prematurely.

One of the big differences, comparing such a contract to the one at the groceries store, is that people don’t always agree on what exactly that contract says, which leaves (a lot of) room for conflict. In fact, my take on relationship conflicts in general is that, other than bad intentions, ignorance, and negligence, disagreements in relationships are almost exclusively caused by two people applying different versions of the same contract to one and the same relationship.

Imagine going to the bank and signing two copies of a loan agreement, and the two versions differ in, say, the interest rate and the payment terms. I think, unless your copy has the higher rate and more frequent payments, the bank will be quite dissatisfied and upset if you don’t make your interest payments on time, in the expected amount…

The same is true in an intimate relationship, with the difference being that there is no written contract. In that sense, a relationship without a written contract requires that, whenever a conflict occurs, the people in the relationship must be willing to “spell it out” and renegotiate: what are my expectations? Why were they not met? Are my expectations unreasonable or even unrealistic? Can we find a middle ground?

For that to be successful, however, it is important that both parties in the relationship understand that the terms must be negotiable to begin with. As soon or as long as one party insists that their terms are “right” or that their views on things are “the only way to see it”, negotiation becomes impossible–something that reminds me strongly of the current political situation, both here in the U.S., but also abroad. And it is somewhat unfortunate that in quite a few situations, one of the parties in a relationship either subjectively or, even worse, objectively is in a position of power to almost dictate the terms of the contract, which, if abused, in the long run can lead to an undermining of trust, the basis for any future success of the relationship…

And speaking of relationships, here’s another idea (I know, coming back to the economy…): naturally, people who work their entire life have the expectation that their retirement will be a reasonably comfortable one, although they no longer put their work force into the generation of wealth and produce. To a certain extent–wherever financial assets and investments exist–this expectation might even be backed up by a written contract. But this obviously doesn’t change the premise of what is supposed to happen: those people have worked for most of their adult life and simply expect that they don’t have to keep working until they are on their deathbed. Society, on the other hand, makes the promise that the elderly as well as those unable to provide for their livelihood by means of work will be taken care of reasonably well.

This social contract between the older and younger generation as well as between working and non-working members of society is now threatened. Why? Over the past 40 or so years, the percentage of generated wealth, as measured by the gross domestic, attributed to the production factor of labor paid in wages has declined slowly but irresistibly–put differently, prices for every good and service used by an actual end consumer are no longer, in the main, determined by the cost of labor, but by the cost of capital and corporate profit margins. On the other hand, more and more–though still select and elite–people are able to afford living without working at all, throughout their entire life, not just retirement, simply by paying for their consumption out of some capital gains. If this trend continues, those who actually have to generate the wealth through labor will no longer be able to provide for everyone… And as much as I believe in free markets and capitalism, I think it’s high time to start re-distributing wealth to those who actually provide for it: the working class!

For those of you who don’t know, I want to start by describing my first ever “investment experience”: around 6 years ago, right after I started working at a small company in the Netherlands, I felt the need to think about my financial future. As part of that process I looked into options for how to invest the small amount of savings I had at the time, as well as the part of my salary I could afford to put out the side. But I also felt much less qualified about economic decision making back then. So I ended up going to my regular bank and bought into a fund product that closely tracked with the popular German stock market index, DAX. After an initial period of a few months, where I would check the fund value relatively often, I just assumed I had made a good decision needing little further thought.

In early 2008 I moved to New York, but kept my fund account in Germany–I yet needed to figure out: would I want to stay in the U.S. for longer, maybe forever? But 2008 turned out to be the year of the financial crisis. Already in 2007 the markets seemed to have hit an invisible ceiling, but that was nothing compared to the market shock of 2008. At the beginning of that year the DAX had already fallen from about 8,000 to under 7,000 points and, with great volatility, remained at that level for a while. What made me “get out” of the market then? Maybe the fact that my “capital” was so far away and I could only watch it decline slowly but steadily from across the Atlantic… Or maybe some “sense” told me that my savings might well be in danger. Anyway, around mid-August of 2008, at a time where the DAX had already lost around 20 per cent of its 2007 peak value, I asked my bank to sell my fund shares for good. One of my best financial decisions ever!

Only a few short months later, after the Lehman Brothers bankruptcy had happened, the DAX crashed and with it the value of the fund I had kept buying over the 2-year period from mid-2006 through mid-2008. In the end I got an averaged annual return of about 1.2 per cent out of that investment, but only because the lump sum had been put into the fund account at the very beginning. Had I sold at the peak period I would have made a nice cut, but had I remained in the market until 2009, I might as well have lost half of my savings! In short, I had been extremely lucky and kind of promised myself never to “play” with financial investments again.

To this day, government officials both in the U.S. and Europe but also the people responsible for our currency at the Federal Reserve as well as the European Central Bank seem to believe that a problem caused, in my opinion, by too much liquidity in the financial sector can be solved by increasing liquidity even further. For instance, if you look at the 10-, 20-, and 30-year gold price chart, you can see that 2001 was a year of “change”. Ever since 2001 the price for an ounce of gold has climbed from around $280, the average price in the years 1999, 2000, and 2001, to an astonishing $1,770 by the end of last week. At the time right before the financial crisis the price was already at $900, three times as much as only 7 years earlier! And after an initial dip down to $700, all that the financial crisis since then has added to the chart is extreme volatility.

I’m not trying to paint a picture of either “our financial system is about to crash” or “our currency will fail soon”. What I want to say is that there is some inflation in our currency, but that this inflation has not yet occurred on the consumer price side. So far, the additional liquidity has found its way mostly into financial products, such as derivatives, but to some extent also wandered into the commodity markets. This means that those markets–including the price for gold and silver, for sure–are subject to a “bubble”. The price level seems unrealistically high. But I think it is at least fair to say that the additional money did not go into increased production and hiring of workers…

And now, finally, after this very long preamble, I can come to the experiment I am doing: since I do not trust the stock market any longer–the price of most traded stock seems to be based more on the fantasy of the shareholders and potential buyers than some “real value”–I decided to put a small fraction of my savings, about $6,000, into precious metals, mainly silver. From my own research over the past few days, it seems that most “experts” recommend that 10 to 15 per cent of savings are put into precious metals.

Not that I’m saying that I necessarily trust these expert opinions… Instead I will try to give a few reasons why, for me, owning just a little bit of silver might not be the worst of things. To be clear, I am not expecting any particular outcome of the economic and global financial situation. If anything, I am trying to be ready for all possibilities. What could happen? Well, first of all, nothing could happen, nothing at all. Maybe the banks and governments are right, and after another period of slow growth and getting the more practical problems straightened out the global economy will be “back on track”. Then again, there is also the possibility that, with all this additional liquidity having been created, governments and banks have very few popular options to “take it back”, to effectively remove money from the system again. Still, any bubbles that exist in some of the markets must, eventually, burst or spill over into the real economy: people will want to spend their “capital gains”, consumer prices might finally show substantial inflation. This increase in spending could be triggered by several factors, one of them being a loss in faith in the stability of the currency. I don’t want to guess, but even with an inflation rate of between 5 and 20 per cent per year, prices for food and other items of daily value could easily double in like 10 years, but also in as little as 4 years, a final-term presidency for sure…

The solution I personally prefer for handling this surplus liquidity would be to truly remove the money–and debt, given that our money is nothing but debt, one way or another–from the system. But that would, of course, require that some people, particularly the better-off, those who profited most from the policies of the past 10 years, must be willing to give up a significant part of their wealth, finally re-distributing from rich to poor. And that isn’t something that, in my mind, could currently be “sold” to the American or European public. So, I do not see anything like that coming. As I said above, yes, the prices of gold and silver are, in all likelihood, already above their “true value”, at least when compared to what a dollar can still buy “on the street”, but…

The current estimates of silver mining, reserve availability, and industrial use, such as data presented as part of the U.S. Geological Survey–and for those of you who know German, here’s a table that contains industrial usage data–say for instance that if “things were to stay the same” as today, we might run out of silver being minable at known locations with currently available technology in about 25 years. Naturally, a lot of previously mined silver is still readily accessible, such as in actual silverware or coins. And when the price for silver were to grow due to shortage in production, I am sure that people would start, in masses, to scourge through their possessions, hoping to find a silver fork or spoon which could then, literally, feed them for a day, at least once it’s sold or bartered. And or course new silver reserve deposits might be found or better techniques developed.

Yet another important datapoint is that, even with already inflated prices of about US$35 per troy ounce today, the silver production of one whole year would cost only a little shy of $27 billion dollars. In other words, the amount of money the Fed is prepared to pump into the market on a monthly basis would already suffice to buy the entire silver production of a entire year. Put differently, the worldwide production of a year is just enough so that each and every American could roughly buy two or three one-ounce silver coins, like the American Eagle–luckily not that many coins are minted! Otherwise, the perfect recipe for a perfect bubble…

Finally, silver has become an essential component in many industrial products. Being the metal with the best electrical conductivity properties at room temperature and little corrosion, it is kind of irreplaceable in quite a few contexts. While exact numbers seem hard to come by, the fact that there are many applications and around 38 per cent of the annual production already is put to industrial use, it is safe to say that silver will always find a buyer. So, despite any possibly existing bubbles in the market, the price will never go down to $0.

And while gold seems much more appropriate with a currency crisis in mind, it is unfortunately far less easy to barter with. Even a relatively small gold coin weighing 1/20 ounce costs already around $100 in today’s market. And gold also has a bad reputation for having seen either official or informal prohibitions, up to confiscations, in the past. Silver on the other hand can be traded or bartered in relatively small units. In times of a possible crisis, which would most likely be very temporary in nature, owning a little bit of silver might come in handy if, for instance, I would want to “pay” for some urgently needed good or service, such as some pain killers from a stranger.

Now, do I actually believe the currency will crash? Not anytime soon, no. But it will need serious effort and, possibly, reform to regain the trust and faith of people before we can come back to a fully functioning economy. Unfortunately, current policies are still rooted in the neoclassical and neoliberal theories of monetary markets. The idea that the job market can be “eased” by flooding the economy with money will hopefully die soon, maybe after the next failed experiment or two. But I want to be prepared for each of the following three situations:

First, nothing could happen. In that case, my investment experiment in buying some silver means neither loss nor gain. Second, the currency/financial markets calm down and the silver bubble bursts. My own estimate for a then realistic silver price would be somewhere around $15 per ounce. I would then have lost around 5 per cent of my savings–although, in the future, these coins might very well still become an investment, I just have to hold on! Third, however, the currency might crash for good. In that case, I will have a small amount of “wealth” (i.e. real value!) in form of silver coins, which I can then barter with until a new currency has been established.

And when it comes to a “new currency”… As a thought for another, future blog post maybe: I still think the best way to organize the “creation of money” would be by simply accepting the notion that money is nothing but our way of doing “double book keeping” with each other. In that case, whenever some actual wealth (i.e. value) is produced or a service is rendered, the person generating the value should simply “create” the money for that value with it. That would give the money creation privilege into the hands of those who also create the value: the people! It’s a little bit like time sharing.

Naturally, people would have to trust one another and, for many tasks, some kind of rule-of-thumb would have to be found as to how the “valuation” of doing that task can be done. At the very least, we would unlikely get back to the current system where people earn so disproportionately based on their jobs. Oh, and making money out of money would of course not work. That would be like making money out of thin air–exactly what banks are doing everyday right now! 😉

Whaaaat? No more economy blogging? Well… I admit, I still have a couple of ideas and thoughts on the economy that are worthy to be blogged about, but I feel I don’t want to become too limited by writing about a single topic all the time. Plus, today I made two very interesting experiences that stirred up the following question in my mind: For me, personally, what are the building blocks of “family”? But first about my experiences…

My boyfriend, who is originally from the Philippines, told me that I had been invited to join his aunt and uncle’s family at a one-year commemorative service for the late mother of his uncle. When I arrived at the family home, I was surprised to find out that the service wasn’t to be held at the local church but rather at their house. And the priest, a friend of the family, was picked up at his place specifically for that occasion. Naturally, not everyone who had been at the funeral service the previous year appeared–the house would also have been too small–but I was again awed by the fact that not everybody who joined in the hour of prayer was part of the “most immediate family” (although among Filipinos that might be a much wider circle). Then again, I myself was also invited, which reminded me of the first observation of the day: family is not a “rigid” concept, something that is seen the same way in every culture, maybe even something that is differently viewed and interpreted throughout the USA, at least when it comes to “who is family”. Let’s just say that I am extremely grateful that I have been welcomed and, in a way, been “inaugurated” into their family!

The second experience occurred to me out of sheer luck. On my way home I had to take the Staten Island Ferry, and while I was climbing the steps from the Yankees Stadium into the St. George Terminal, I saw a woman with an obviously heavy suitcase who I asked if she would accept my assistance. She would, and on my way up those steps I began a conversation. As it turned out, she was on her way to work, a job in which she is helping foster parents doing the best they can in situations with children from socially and behaviorally difficult backgrounds. My interest was kindled–both of my two older brothers are working in this very field: assisting children and their families in situations where external advice and support due to social or behavioral problems is either requested or required by law.

During the conversation that ensued, which made the time that I had to wait for the ferry as well as the ride to Manhattan seem to pass in mere minutes, we touched many topics. And while the following thoughts are naturally not a complete recollection of the entire conversation, I think they capture the gist of what was said quite well:

Some of the more central elements of family have to be mutual respect, care, and interest as well as structure and dependability. When people who are, at least in the more common case of families not entirely out of choice, living together, forming a unit, it is important that each member of that unit shows respect for the other members and their situation. Equally, it is essential that in cases of distress care and support should be given to those who need it, and that to determine or rather detect those cases, a general attitude of interest for each member has to be present. In fact, I would go as far as saying that these three elements are probably the basis for any form of relationship, at least any relationship that works and lasts, and that not only refers to personal but explicitly also includes business relationships. But on top of these, it is important that a family also provides structure. Instead of having to constantly negotiate meal or meeting times, chores rosters, financial obligations and allowances, plus a general code of conduct, families usually have–in most cases unwritten and not even necessarily ever spoken-out-loud–rules, almost-laws that each member is supposed to obey.

Out of the discussion came the thought that one of the issues I perceive in “unhappy families” is that those rules are, in fact, not very well developed (so they exist), or that they are dominated by either the parents, such as in an authoritarian household, or the children, families where parents are over-indulging their offspring to the extent that those children have little reason let alone the chance to ever learn that the contract underlying a functioning social relationship should never be too demanding or disadvantageous for one of the sides, because the relationship will then sooner or later break apart or become inefficient.

To be clear, I think that love and sacrifice are equally important elements of family, like parents being there for their children, no matter what, who will undertake anything and everything to ensure that “their next generation” will have the best possible foundation available for their lives. But as much as being willing and able to sacrifice might be, if the resolve and oftentimes action shown by parents in form of a sacrifice on their part is not paired with a mutually agreed-upon “social contract”, then I do not find it surprising that parents might complain about their children who, after everything that has been done “for them”, are ungrateful or lack respect. The same is, however, true for children who complain that their parents are never available and don’t show enough interest in their lives, by which I do not only mean practical outcomes but also the internal struggle in children’s lives as well as their emotional well-being.

The funny thing is that, once this contract becomes “visible”–that is, the members of the family actually talk about what should and what should not be part of the contract–many conflicts seem manageable at the very least, even if some solutions might require “thinking outside of the box”: for instance, I remember that when I was about 9 years old, my entire family once went to some group therapy sessions in which we were asked to role-play some of the more typical conflict situations that occurred, an activity followed by a feeling of amusement about the absurdity of our own behavioral scripts–and insight!

Unfortunately, our current way of living–including the mantra of ever-increasing productivity and economic growth–simply does pose many problems for a small-income or single-parent family. What to do when school ends at 5 in the afternoon, but the mother has to work until 7:30pm to make ends meet? Well, obviously the mother cannot simply abandon her job to “fulfill” the contract: in my opinion at least, a younger child has the somewhat reasonable expectation that a parent or guardian will be available for supervision and support during the day. But to simply tell your kid, “mom will be home at 9, just watch some TV when you get home” doesn’t seem like the solution of choice either… When the mother then does come home late and something happened during the hours the child was home alone, both mother and child might end up playing a round of the “who’s-to-blame” game. An equally fruitless as well as predictable endeavor: possibly a few moments of pleasure from vindictiveness and vengeance but definitely and eventually a lot of frustration and resentment on both sides!

Looking back on my own childhood, I once again can only say that I count myself as extremely lucky. After just having returned to working as a teacher once my two older brothers could be left in the care of a nanny for at least a few hours at a time, my mom unexpectedly got pregnant again, with me–which is a story in itself, and I want to do it justice, so I’ll tell it some other time… Suffice it to say, my mother decided that she would retire from being a teacher and become a full-time housewife instead. That meant that I grew up with the secure knowledge that when my day at kindergarden or school was over, someone family would be home, usually waiting with a freshly prepared meal as well as the true interest in and support with whatever was going on in my life at the time. On the other hand, my dad, while maybe being a quantum unorthodox and unfinished in his child-rearing methods, would always allow questions, try to explain the rules he sought to implement, and share his views on things with the whole family.

This combination, a dependable structure, full of loving, kind interest and support, paired with the effort to learn, improve, and then teach how to communicate and negotiate this social contract that defined and still defines our family, is probably why, to this day, I count each and every member of my immediate family to those people I would sacrifice literally everything for.

And, as a last remark: as much as I endorse the somewhat conservative idea of a family being a couple of two loving people caring for the children so as to educate them and help them develop a good moral character of their own by providing the necessary framework, I simply fail to see why a gay couple, two men as much as two women, would be unfit to meet the challenge. Quoting from Mitt Romney’s website about values:

“The values that Mitt Romney learned in his home have enriched his life immeasurably. With his parents’ example before him, he married, had five sons, and now basks in the joy of eighteen grandchildren.

Marriage is more than a personally rewarding social custom. It is also critical for the well-being of a civilization. (…)”

If only he would have ended there, and I couldn’t have said anything against it. What I find very sad, however, is that it doesn’t say what those values are and why gay couples would be unfit to pass them on:

“(… continued) That is why it is so important to preserve traditional marriage – the joining together of one man and one woman. As president, Mitt will not only appoint an Attorney General who will defend the Defense of Marriage Act – a bipartisan law passed by Congress and signed by President Clinton – but he will also champion a Federal Marriage Amendment to the Constitution defining marriage as between one man and one woman.”

If he refers to (character) education, I must say that I am very disappointed to see that the page on his site about education doesn’t seem to mention the role of functioning families at all–I hope this doesn’t imply children are supposed to learn what it means to uphold and respect a social contract at school, a little late I would say…

Over the past week, I’ve spent a considerable amount of time “brooding” over the amount of debt the American people have accrued, both the nationally but also the privately held debt. It is almost as if I can literally feel that debt weighing down on me as well as on many other people. I even began by writing this very blog entry dedicated to putting together a lot of exact numbers–back in high school I was fairly good at math, maybe that’s why I liked the idea–but then I realized: it is actually relatively unimportant how large the debt exactly is. What matters is the effect that “being so deeply in debt” has on people. For the most part, I would say that being in debt comes with a feeling of “not being able to afford something I usually would want to get and could pay for”. And sometimes the things people cannot afford to buy can be very important things… But being as deep in debt as we are at the moment probably comes more with the feeling of being “owned” by whoever I am indebted to.

Naturally, there are still quite a few Americans who do not yet personally suffer from the effects of either the national debt or their personal debt, should they have some. At least the way in which they suffer is probably very subtle, almost invisible even, and has not yet reached levels that affect their day-to-day activities let alone their ability to buy enough food to live off. But there are yet ways in which this kind of indebtedness affects everybody: by reducing our freedom in a considerable way, slowly eroding it. My assumption is that, if the amount of debt keeps increasing, the American People will, in the end, be “enslaved” by policy decisions made solely based on fiscal arguments. Even in the current presidential race, few people seem to ask the question whether or not any of the budget items for which candidates suggest cuts are useful or essential. The fact that “we need to save money” seems like all that matters. And another aspect is that not only those people with little money and potentially monetary debt will be enslaved, but also those with considerable wealth will be enslaved to follow “the rules” the financial markets dictate.

I’m now trying to step back from any concrete problems and instead attempt to describe the intersection of the society and economy I live in as I see it… It seems a fair assessment that, based on the division of labor and the highly specialized processes required to produce many if not most of the goods we have grown used to, we simply need a way of ensuring that the wealth that is being produced by the people through some form of work is, somehow, distributed. And I want to make it clear that I do not refer to wealth only as physically graspable goods, such as food, clothing, or cars, but also other accomplishments that increase our general quality of life and welfare, like education, public safety, and the rule of law! On the other hand, I sometimes have very strong doubts that some of the services provided by parts of the financial industry can ever be described as “generating wealth” of any kind, at least not when it comes to “commonwealth”, which is just a translation of the word republic!

Over time, the pre-dominant way that developed to determine the distribution of goods and services, in general, is based on a token-based, free-market economy. In such an economy, goods and services are “swapped” for currency based on a price that is, at least in theory, determined by supply and demand, which then automatically provides each individual participant of the economy with the greatest value, hence maximizing the overall wealth. For one, it ensures that goods of “lesser value” with the same requirements for resource use are, over time, removed from the market place. Importantly, the reason this system is chosen by the government, the democratically elected representatives of a republic, is not to benefit the few and allow individuals to get rich, but rather so as to generate the greatest benefit for society as a whole! It is also important to take into account that if the profit margin of anyone providing services, such as in case of education, or producing goods, such as in assembling cars, becomes too great, the price should be considered too high, such that the general population certainly does not get the “greatest value” in return…

As far as I can see, this description does not contain any information on how the required currency is provided, nor does it give any detailed rules as to how some of the less individual but rather society-based desires can be satisfied. And at this point I would like to describe my most recent thoughts based on a few observations:

In almost all market-based economies, the idea of having a central bank, which is as far as possible from government influence, that provides the currency seems being considered as without alternative. To the extent to which I understand economics, this is however by far not a proven fact, but rather it is the currently favored, and thus accepted, hypothesis or model. While some past occurrences have indeed shown that by simply giving the right to create money to the executive branch of government can lead to disaster, I don’t think that any proof has been presented that would allow to draw the conclusion of the opposite, namely that putting money creation into the hands of privately run banks is necessarily “in the interest of the people or society”. And given that this privilege of creating money seems to come with at least “some power”, I must admit I am quite surprised that the Supreme Court of the United States hasn’t yet found that allowing private banks to “create money” is unconstitutional.

In addition to the idea that a central bank is organizing the monetary supply, the idea that interest has to be paid for a loan seems equally without alternative. And what’s more, in the current flavor of monetary lending practices, the interest is not only paid on the original loan, the principal, but on all subsequently accrued interest-based debt, that is to say compound interest, in other words a possibly exponential growth of debt. Funny enough, I would at least see several ways in which the currently existing system could be “extended”. I’m not necessarily saying that each of my thoughts would be an improvement, but to say that “things have to be the way they are” simply seems to easy. For one, Congress could set rules prohibiting extremely high interest rates beyond, say, 10 per cent. And in cases were such interest rates yet seem reasonable, such as where the risk for the borrower is indeed very great, legal provisions could enforce that interest rates have to decline over time automatically and that compound interest is only legal for very low interest rates. In other words: if my history demonstrates a high risk of me being a potentially defaulting loan recipient, I might initially have to pay a high interest rate, say 25%, but once I have made regular interest payments over a certain period of time, the interest rate either would have to be lowered substantially or, alternatively, any interest that was not paid will not be added to the amount on which I have to pay that interest rate, as this amount was not part of the initial risk of the borrower anyway. And finally, if someone giving out a loan makes some profit with receiving interest, I find it not only fair but essential that this person than also truly carries the risk in the case of a default on the loan.

Why do I see those issues as problematic to begin with? Well, starting with the second area that is not covered by the description of a free-market society, I would argue that there are many desires which a society might express as a whole rather than individually. For instance, in the United States some of these desires are put expressly into the Declaration of Independence:

“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.–That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, –That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.”

I would argue that, naturally, the pursuit of happiness is certainly something every individual has, but on the other hand it might not be necessarily true that each individual wants to guarantee this for every other individual equally, which is why it was made something government shall try to achieve. In a way, this principle is somewhat contrary to the idea of some of the elements in our very economy insofar as competition, in the sense in which it is used in sports like the Olympics, requires equal chances and footing. Obviously if someone owns a lot of capital, mostly in form of currency liquidity, that person does not have to “struggle” as hard as someone else if they wish to pursue their happiness–or pursue anything else for that matter, so how can that be considered fair competition. Furthermore, it seems to me that while none of the people heading the “too big to fail banks” has been elected by “The People”, banks and other financial firms are beginning to exercise a great amount of influence over political decisions, to the point where I would question to what extent the actual government is still “in power”–and if that were not the case it would almost seem like a constitutional duty to attempt to abolish any form of government that has not been given the consent of the governed.

Now, please, don’t get me wrong. I’m not a fan of socialism or another kind of systems that wishes to simply “equalize” monetary means among participants of a given economy. But the idea that some participants of our economic system can consume goods and services in pursuit of their happiness simply by owning “excess capital” and living off interest payments made by others who require some of this excess capital to be able to participate in the economy at all seems not only strange but outright dangerously close to violating some of the principles the Founding Fathers wanted to see granted for every person living in the United States. The King of England was considered overbearing at the time, and in my mind at least the financial industry is playing an every more important role in how our daily lives are shaped.

As part of living in a society that, I would hope, is a civil society with a basis in the ideas of some of the greatest philosophers, my vision is that each and every member of society should participate on both sides: giving and taking. And the giving should not be limited to having one’s money “do the work”–which is a true misnomer in my opinion: money cannot work, it can simply be used to suck up someone else’s contribution to society in form of interest payments…

Do I see any hope? Well, yes, of course! But the vision I have would require people to give up quite a bit on the idea of “owning” an entitlement that is counted in forms of a dollar amount, at least when it comes to amounts that, by far, exceed what they could ever spend on regular consumption goods in the foreseeable future. So long as someone has the ability to “conserve” effort that was put into the economic system for very long periods, and pile up this conserved effort to ever higher mountains, the system will always carry an incalculable risk of failure. In that sense, I actually believe that re-designing some of the government-run programs, like Medicaid and Medicare, into a system that, within reasonable contraints, promises to pay for people’s basic needs and medical expenses when their insurance doesn’t cover for it or they simply don’t have an insurance, but that doesn’t do so in form of expressly stating dollar amounts is a necessary step to fix things. More generally, holders of U.S. Treasury Bonds would have to give up at least part of their entitlement, which next to Medicare and Medicaid also includes debt held by retirement funds, private investors, and investment firms.

But another big contribution that has to be made is that banks need to return to an actually useful business model: that of providing required services to society, not a way of providing the people working at banks with the means to get rich for their own sake, which then is rather a disservice to society. Financial capital is meant to serve the people, not the other way around…

Do I blame anyone involved? Not at all. If anything, I would say that the mantra of “if I just had a little more money, I’d be so much happier” works a bit like a virus. Once it infects our minds it almost is like taking over control of our lives. Involuntarily I am reminded of a movie from the 80s: They Live. A zombie-like world where many people have been brain-washed and are no longer seeking true happiness in their lives. And just as in the movie, at the very end, no-one in our society, not even someone who seemingly benefits from this way of organizing our economy, truly wins. Maybe we should step back a little from the numbers and think about what we, as a society, want our lives to look like, and what our government’s functions are supposed to be and then find ways for us to strive towards that goal and our government to fulfill those functions.

Maybe you’re thinking: well, now Jochen must have lost it… I mean, at first, this question does seem a little like I am taking myself way too seriously here, right? It’s “just a blog”, it’s not a professional project, and so what the heck would I need an editor for anyway.

Well, yesterday I had two experiences that at least made me think there are benefits to having an editor. One was a long conversation I had with Marck, my boyfriend of more than three years now, in which he pointed out how, each time I had blogged in the middle of the night, literally burning my midnight oil, I might have been putting less scrutiny into my thoughts and, inadvertently of course, could have written something I wouldn’t have under other circumstances. And while I assured him that I have made it a rule to reread each and every blog post at least twice, in full, before hitting the little “Publish” button that WordPress offers, I cannot make the claim that I would never write something, particularly if it is written in “the heat of the moment”, that I might put differently at another time or in another mindset. The fact that typos and some other flaws remain is proof enough for me that I’m not perfect!

The second experience was that shortly after publishing my previous post about how accepting one’s mortality might be beneficial for the quality of our lives, a somewhat nagging feeling overcame me, and I wanted to “double-check” with Hedy Kober, the lead author of the soon-to-be-published study I am mentioning, whether I had overstepped any limits. And while I felt fairly confident, at the time of writing the blog post, that I hadn’t, I also couldn’t shake off the feeling that maybe I still had…

So that, in short, is why I think an editor might be beneficial: to provide a reality check on my assessment of values, and to work as a sounding board for my, uhm, admittedly present vanity, assuming that is the right term to describe my predicament. And I sincerely hope that I am only suffering from a relatively mild and harmless amount of it…

And again you might think: “What on earth is he talking about??”

Yeah, well, I think it is a confession which I must make sooner or later anyway… You see, as much as I can say that I enjoy a philosophical debate (which I do!), there is also a small but significant part of me that felt and feels having those debates in private with friends wasn’t and isn’t quite enough. This part “inspired” me to register this domain name and, in a way, has “driven” me to posting more or less regularly since this blog’s inception less than two weeks ago. Is it something I have a problem with? Not yet, or at least I hope so. And neither I hope is it a problem for my readers. But…

A couple of days ago I read a Facebook post in which a friend and former colleague of mine mentioned an article in Slate Magazine covering “Jonah Lehrer’s Journalistic Misdeeds at Wired.com”. So far I haven’t yet “self-plagiarized” my blog posts, at least to the best of my knowledge. I have just been hacking away at the keyboard every time I post, not using some sort of copy-and-pasting, with the exception of the Facebook comment I paraphrased for my post the other day–something I expressly noted there. But I think that every “misdeed” is, to some extent, a misjudgment in values and in some kind of moral code that people who want their published works to be taken seriously better adhere to.

The deeper issue this very article’s author, Charles Seife, raises is that people reading any kind of material that is published have an expectation about what they’re consuming. In the case of Jonah Lehrer, Seife argues that people had the reasonable expectation that every time a new article was written by Lehrer, each of these articles had to be “brand new”, at least to a great extent, and not simply “recycled” from prior work. As to whether or not that is a reasonable expectation and assumption, I must admit that I have a somewhat more nuanced opinion about.

Equally as in music, I believe that creative work always is a recombination of already existing material. To what extent this should be achievable by merely paraphrasing, if not copying parts of existing work–written by the same author previously, mind!–I cannot say, but at least in the realm of music remixes are among the most popular works published. And I tend to agree with wikipedia’s quote of Mr. Lehrer’s publisher, hoping the quote is correct, as I currently don’t feel like putting in an hour of “fact checking”, that you shouldn’t have to ask for permission to reuse your own works, and that Mr. Lehrer simply didn’t correctly state whenever he did so. Next to the re-use of his own material, there are claims of fabrication and misrepresentation of quotes and facts, which is something entirely different, and I currently don’t want to comment on, as I know by far too little about the whole background or Mr. Lehrer’s writing in general…

The initial question I had, however, remains interesting to me. Why? Well, as much as this blog is not a professional project–quoting from my very first post: “Given that I lack (complete and/or certified) academic, scientific training, I would never consider myself aprofessional philosopher“–I want my readers to enjoy consuming this blog and, while I prefer not to think of life as trying to meet expectations, I still want to allow readers to have at least some reasonable expectations about it. In that sense, I might at best approach this issue by asking: are their any “standards” I want my blog to meet?

Essentially I want to present my thoughts and opinions, as truthfully as possible, in a way that is, if anyhow achievable, entertaining but at the same time not at the expense of others. In short, I generally feel very opposed to the idea of inflicting pain or serious harm, which leads me back to my original conclusion: having an editor might very well work as a kind of sounding board. I try, very hard, to look at what I’m writing from different perspectives–does what I have written have the potential to cause pain?

Under certain circumstances, it seems inevitable to cause pain if I want to express my thoughts truthfully. Someone reading my blog might, for instance, already be “hurt” by encountering a thought that contradicts a vital aspect of this person’s worldview or way of life, such as in my post about abortion after rape. I would still feel saddened but, again, not sorry. Still I want to extend every effort possible to avoid publishing thoughts that, if I were to put myself into the position of someone not sharing my views, were construable as a personal insult or as hurting someone on purpose.

Equally, I want to and when it comes to my work as a research assistant at Columbia am even legally required to ensure that I do not publish anything that can be considered as a breach of confidentiality. When friends are concerned, I do not wish for them to feel less inclined to share their views with me in private because they fear being named in my next blog post. And equally I want the people I work for and with to have the faith that I will not publish anything that would affect their work or reputation negatively in any way.

How will I go about this practically? Well, I am not sure whether I can find someone willing to be an actual “editor”, someone who wants to perform the probably tedious and not necessarily altogether enjoyable task of having to “fact-check”, or rather “value-check” my posts. In case you are among the people I trust and feel inclined to apply for the “job”, let me know! In the meantime, I will send new posts to a small number of friends, probably two or three at most, and wait… If I hear back from them with comments, I at least know where to put some more effort into. And if I do not hear back from them, I will have to concede to rereading the post, after cooling down a little from that “heat of the moment”. Hopefully that can improve the quality and enjoyability of my posts. As always, comments are welcome!

Working in a psychology lab focused on social cognitive neuroscience at Columbia University has allowed me to keep an eye out for answers to some very profound questions I have been asking myself for a long time, and even I don’t remember how long. One of these questions is, “how do you react to fear?” Incidentally, in one of the studies run at our lab, subjects were instructed to either react naturally to scary and pain inducing images or, alternatively, to try and put themselves into an accepting mindset, one in which the fear they were to experience simply would be allowed to exist. But more on that later…

Naturally, there are fears that better be reacted to, such as when an immediate threat enters our consciousness, and probably shortly before that it enters our subconscious, and our bodies are, almost automatically, set in motion to either avoid the threat, like dodging an oncoming car when we step onto a street we erroneously thought was empty, or to try and neutralize the threat, like taking aim and trying to thwart an insect we assume has the capacity to inflict pain or spread disease.

This kind of instinctive program, the fight-or-flight response, is still very strong and powerful in our species, and, at least in the here and now, for good reason. But humans have also evolved quite a bit further, and something else is by now “added to the program”, something that I believe is at the center of the human condition: we know that no matter how much we struggle for life, and no matter how well we adapt this fight-or-flight response, in the end we cannot win. We are, one could say, doomed to die. Obviously, I am not the only one talking about this: for instance, in a 2003 documentary, “Flight from Death: The Quest for Immortality”, something I can recommend as worth watching, for instance at Netflix, film makers explore this question together with psychologist and anthropologists.

The paradoxical condition we find ourselves in can, I think, be characterized by those two elements and a twist: our instincts and intuitive responses, almost immutably, compel us to react to threatening cues in the environment such as to preserve our lives. But at the same time we have foreknowledge, and this is one of the very few things I would say most people agree we know with the highest degree of certainty, that one day must come when we will die. If the two layers in our minds–the subconscious effort to preserve life and the conscious knowledge that we must, eventually, fail–were separate entities, operating side by side, maybe we didn’t have to suffer. And here is where the twist comes in: conscious thought has the ability to generate subconscious states. And this is also true for future events, even if the details of these events aren’t yet available. Thinking about or being reminded of our mortality generates, even unbeknownst to us, a state in which we are more likely to pick up the fight. Which is also why we can be excited in light of anticipating a positive event.

So, if this reaction of fear is in the subconscious whenever we think about death, is there any hope of ever finding peace? Well, here is where I would want to add to the movie by presenting some, admittedly preliminary and not yet published evidence from the study in our lab: being accepting of one’s fear, that is to say allowing oneself to experience fear but doing so not with the intention of reacting, that is to say taking a path outside of fight-or-flight, seems to have the effect of lowering the actual impact of that fear. In other words, by consciously deciding not to react to a threatening cue in the environment, but rather acceptingly experiencing its impact, we are, at least partially, able to mitigate its emotional consequences and, possibly, lower its “call for action”, something that still needs to be studies in depth…

I recently posted on this blog about why I love living in the U.S.A. And there isn’t really anything I feel I have to take back about this post. But… The instinct of preserving life has become something that, as an outsider, I would almost call ever-present, all-trumping, an obsession. The debate on abortion, something I also posted on already, is one example. Good people are fighting one another over when life begins, probably driven by, on the pro-life side, the fear of their own mortality. Another and potentially much more dangerous example is the American notion of protecting life world-wide. The reason why conservatives want to stock-pile weapons and bombs is not to destroy life but to protect it–how could you, without a good ace up your sleeve should life become threatened, right? But, as the documentary movie so aptly puts: the desire to protect one’s life has the subconscious effect of increasing the impulse to fight, and then of course fight those who seem to have a different world view, as that is what threatens our way of life. In short, this is a vicious circle, one that evolution unfortunately didn’t see coming… And I must admit it would be very unfortunate if the human condition is one where the instinct to preserve life is, in the end, what destroys it.

My own vision? If we could just all accept some realities, such as that people have different religions and world views, and that we all will die, then, maybe, we can all share this reality and have wonderful experiences together, and at least reduce the suffering caused by this truly and ultimately useless fight.

There is yet little scientific basis for my vision, but I am hopeful that someone out there might feel this is worth exploring: can accepting the fear that comes with the foreknowledge of death reduce the impulse to fight? And if the impulse is reduced, what are the consequences practically.

Outside of science, in thoughts people post online as well as in revered literature, there is of course ample “evidence” that others have thought of this before, and that I am not the only one with this vision. I want to share two examples:

Midnight Reflection: If life was the ultimate game, I would rather prefer to loose. Because winning dehumanizes my true ethical being. In other words, being the king of the world also means losing everything else. And that “everything else” is what makes me a compassionate human being.

And I take the liberty to copy and paraphrase from the comment I made to that post… Aren’t we all losers? Then again, can’t we also be champions? At least potentially? This much we know: we are guaranteed to die! Unfortunately, for most people it seems that life is about fighting death, fighting mortality, which is to say they simply react to their emotion of fear, although this fear is entirely caused by imagining the future, a future in which they no longer exist.

This struggle causes so much pain and suffering, and for as long as we literally suffer from the illusion we could ever win this fight, I do believe we cannot be truly human. So, to be a champion, one must accept that, in the very end, the fight must be lost–but, equally, fight we must, as life preserves itself through instinct!

To borrow another image from someone whose books have been read by millions, I want to quote J.K. Rowling, who has her title character Harry Potter think and experience the following (J.K. Rowling. “Harry Potter and the Half-Blood Prince”, p. 512):

But he understood at last what Dumbledore had been trying to tell him. It was, he thought, the difference between being dragged into the arena to face a battle to the death and walking into the arena with your head held high. Some people, perhaps, would say that there was little to choose between the two ways, but Dumbledore knew – and so do I, thought Harry, with a rush of fierce pride, and so did my parents – that there was all the difference in the world.

So, yes, the true champion walks into the arena of life, knowing the fight will be lost, but with his head held high, accepting the inevitable but not despairing. And, to extend on that image a bit, that championship is exactly what Harry achieves, when he walks through the Forbidden Forest to meet his own death: you know what’s coming, death, but you still face it with dignity and humanity!

If we just, in our own lives, were accepting a bit more of the fact that, one day, we will no longer exist, and take it with a bit more “Buddhism” in our hearts and minds, not fighting it, but enjoying life while it lasts, maybe we would discover that the differences between cultures and ways of life are not reason enough to die for…